Only a Roosevelt-Scale Counterrevolution Can Prevent Great Depression II

By Robert Kuttner, The American Prospect
Posted on September 18, 2008, Printed on September 19, 2008
http://www.alternet.org/story/99241/
The current carnage on Wall Street, with dire spillover effects on Main Street, is the result of a failed ideology -- the idea that financial markets could regulate themselves. Serial deregulation fed on itself. Deliberate repeal of regulations became entangled with failure to carry out laws still on the books. Corruption mingled with simple incompetence. And though the ideology was largely Republican, it was abetted by Wall Street Democrats.

Why regulate?

As we have seen ever since the sub-prime market blew up in the summer of 2007, government cannot stand by when a financial crash threatens to turn into a general depression -- even a government like the Bush administration that fervently believes in free markets. But if government must act to contain wider damage when large banks fail, then it is obliged to act to prevent damage from occurring in the first place. Otherwise, the result is what economists term "moral hazard"-- an invitation to take excessive risks.

Government, under Franklin Roosevelt, got serious about regulating financial markets after the first cycle of financial bubble and economic ruin in the 1920s. Then, as now, the abuses were complex in their detail but very simple in their essence. They included the sale of complex securities packaged in deceptive and misleading ways; far too much borrowing to finance speculative investments; and gross conflicts of interest on the part of insiders who stood to profit from flim-flams. When the speculative bubble burst in 1929, sellers overwhelmed buyers, many investors were wiped out, and the system of credit contracted, choking the rest of the economy.

In the 1930s, the Roosevelt administration acted to prevent a repetition of the ruinous 1920s. Commercial banks were separated from investment banks, so that bankers could not prosper by underwriting bogus securities and foisting them on retail customers. Leverage was limited in order to rein in speculation with borrowed money. Investment banks, stock exchanges, and companies that publicly traded stocks were required to disclose more information to investors. Pyramid schemes and conflicts of interest were limited. The system worked very nicely until the 1970s -- when financial innovators devised end-runs around the regulated system, and regulators stopped keeping up with them.

Seven Deadly Sins

Sin One: Allowing Mortgage Lending to Become a Casino. Until 1969, Fannie Mae was part of the government. Mortgage lenders were tightly regulated. Homeownership rates soared throughout the postwar era, from about 44 percent on the eve of World War II to 64 percent by the mid-1960s. Nobody in the mortgage business got filthy rich, and hardly anyone lost money. Fannie's job was to buy mortgages from banks and thrift institutions, to replenish their money to make mortgages, and along the way to set standards. Fannie financed its operations by selling bonds. In the late 1970s, private Wall Street firms started emulating Fannie. They packaged mortgages, and converted them into bonds. Over time, their standards deteriorated, because they could make more money creating riskier products. In order to avoid losing market share, Fannie emulated some of the same abuses. Government did not step in to regulate the affair -- which was a time bomb waiting for the creation of the sub-prime mortgage business.

Sin Two: Allowing Unregulated Bond Rating Agencies to Decide What was Safe. Sub-prime is only the best known of a widespread fad known as "securitization." The idea is to turn loans into bonds. Bonds are given ratings by private companies that have official government recognition, such as Moody's and Standard and Poors, but no government regulation. These rating agencies have become thoroughly corrupted by conflicts of interest. If you want to package and sell bonds backed by risky loans, you go to a bond-rating agency and pay it a hefty fee. In return, the agency helps you manipulate the bond so that it qualifies for a triple-A rating, even if the underlying loans include many that are high-risk. Without the collusion of the bond-rating agencies, sub-prime lending never would have gotten off the ground, because it would not have found a mass market. Had regulators looked inside this black box, they would have shut it down. They might have needed new legislation, but they never asked for it. And public-minded regulators might have done a lot under existing law, since banks (which are regulated) were heavily implicated in the financing of sub-prime.

Sin Three: Failing to Police Sub-prime. The core idea of bank regulation is that government inspectors periodically examine the quality of bank assets. If too large a portion of a bank's loan portfolio is behind in its interest payments, the bank is made to raise more capital as a cushion against losses. Problems are nipped in the bud. But complex securities require more sophisticated regulation than simple loans. Regulators basically waived the rule on adequate capital for the new wave of mortgage lenders who created sub-prime. Many mortgage companies were not banks. They made loans only to sell them off to the Wall Street sinners of Deadly Sin No. 1 (see above). So there was no loan portfolio to examine, and no real capital. The Democratic Congress anticipated this problem in 1994, when it passed the Homeownership Opportunity and Equity Protection Act. This prescient law required the Federal Reserve to regulate the loan-origination standards of mortgage companies that were not otherwise government-regulated. But Alan Greenspan, a free-market zealot, never implemented the law. And when Republicans took over Congress in 1995, they never called him on the carpet.

Sin Four: Failure to Stop Excess Leverage. The financial economy is crashing today because so much speculation was done with borrowed money. A typical leverage ratio of a hedge fund or private equity company is 30 to one. That means $30 of debt for $1 of actual capital. If you make one serious miscalculation, you are out of business. And in the case of sub-prime mortgage companies, the leverage ratio was infinite, because they had no capital. The game was entirely based on creating debt. As long as times were good, financial firms could keep borrowing to finance their deals. But once investors looked down, they panicked. Some parts of the system are unregulated, such as hedge funds and private-equity companies. But they all ultimately get a lot of their funding from banks. And regulators do retain the power to look closely at banks' books (see Sin No.3 above). Had they used that power to police the kind of highly risky stuff banks were underwriting, they could have shut it down.

Sin Five: Failure to Police Conflicts of Interest. Remember the accounting scandals of the 1990s? In those scandals, accounting firms were paid once to audit corporate books and then again to help clients cook the books and still pass muster with the audit. That was a sheer conflict of interest. Though accountants were (loosely) regulated, Congress did not crack down until cooked books caused the stock market to crash. A second conflict of interest was the corruption of stock analysts, who were telling customers to buy dubious stocks because their bosses were profiting from underwriting the same stocks. In the aftermath of the dot-com bust, Congress narrowly cracked down on these two abuses with the Sarbanes-Oxley Act but simply ignored others -- such as the role of bond-rating agencies and the habit of basing executive bonuses on stock prices that could easily be manipulated by the same executives.

Sin Six: Failing to Regulate Hedge Funds and Private Equity. When Roosevelt's New Deal acted to rein in the abuses in financial markets, it regulated the major players -- commercial banks, investment banks, stock brokers, holding companies, and stock exchanges. But two of the biggest purveyors of risk today -- hedge funds and private-equity firms -- simply did not exist. Today, private-equity firms and hedge funds do most of the things banks and investment banks do. They basically create credit by making markets in exotic securities. They buy and sell firms. They speculate in financial markets with borrowed money, taking much bigger risks than regulated banks. According to House Banking Committee Chair Barney Frank, more than half the credit created in recent years has been created by essentially unregulated institutions. The people in charge of the government -- conservative Republicans -- took the view that these new-wave financial players offered transactions between consenting adults who needed no special consumer protection. But they were oblivious to the risks to the larger system.

Sin Seven: Repeal of the Glass-Steagall Act. This action, in 1999, was one of two major cases when a cornerstone of New Deal regulation was explicitly repealed. (The other was the repeal of the Public Utility Holding Company Act, and if your utility rates are sky-high, you can thank Congress for that, too.) Glass-Steagall provided that if you wanted to speculate as an investment bank, good luck to you. But commercial banks were part of the banking system. They created credit. They were regulated, supervised, usually enjoyed FDIC insurance, and had access to advances from the Fed in emergencies. So commercial banks and investment banks were two different creatures that should stay out of each other's knitting.

But beginning in the 1980s, regulators who didn't believe in regulation either allowed explicit waivers of some aspects of Glass-Steagall or looked the other way as commercial banks and investment banks became more alike. By 1999, when Citigroup had jumped the gun and assembled a supermarket that included a commercial bank, investment bank, stock brokerage, and insurance company, Glass Steagall was so hollowed out that it was effectively dead. The coup de grace was its official repeal, in the Gramm-Leach-Bliley Act. That's Gramm as in former Sen. Phil Gramm, a deregulation zealot and top adviser to John McCain.

Three Basic Reforms


What all of these sins had in common was that they led financial markets to misprice assets. In plain English, that means buyers were purchasing securities based on bad information, often with borrowed money. When firms started losing money on sub-prime in mid-2007 and other owners decided it was time to get their money out, the whole miracle of leverage went into reverse. And it spilled over into other securities that had been mispriced thanks to all the conflicts of interest tolerated by regulators.

That's why, no matter how much taxpayer money the Federal Reserve and the Treasury keep pumping in, they can't turn dross back into gold. The next administration and the Congress need to return the financial economy to its historic task of supplying capital to the real economy -- of connecting investors to entrepreneurs -- and shut down the purely casino aspects of the system that have only enriched middlemen and passed along huge risks to everyone else.

Reform One: If it Quacks Like a Bank, Regulate it Like a Bank. Barack Obama said it well in his historic speech on the financial emergency last March 27 in New York. "We need to regulate financial institutions for what they do, not what they are." Increasingly, different kinds of financial firms do the same kinds of things, and they are all capable of infusing toxic products into the nation's financial bloodstream. That's why Treasury Secretary Hank Paulson has had to extend the government's financial safety net to all kinds of large financial firms like A.I.G. that have no technical right to the aid and no regulation to keep them from taking outlandish risks. Going forward, all financial firms that buy and sell products in money markets need the same regulation and examination. That will be the essence of the 2009 version of the Glass-Steagall Act.

Reform Two: Limit Leverage. At the very heart of the financial meltdown was extreme speculation with esoteric financial securities, using astronomical rates of leverage. Commercial banks are limited to something like 10 to one, or less, depending on their conditions. These leverage limits need to be extended to all financial players, as part of the same 2009 banking reform.

Reform Three: Police Conflicts of Interest. The conflicts of interest at the core of bond-raising agencies are only one of the conflicts that have been permitted to pervade financial markets. Bond-rating agencies should probably become public institutions. Other conflicts of interest should be made explicitly illegal. Yes, financial markets keep "innovating." But some innovations are good, and some are abusive subterfuges. And if regulators who actually believe in regulation are empowered to examine all financial institutions, they can issue cease-and-desist orders when they encounter dangerous conflicts.

We're talking about a Roosevelt-scale counterrevolution here. But nothing less will prevent the financial collapse from cascading into Great Depression II. And the public should never again forget that this needless collapse was brought to us by free-market extremists.

Robert Kuttner is co-founder and co-editor of The American Prospect magazine, as well as a Distinguished Senior Fellow of the think tank Demos. He was a longtime columnist for Business Week, and continues to write columns in the Boston Globe. He is the author of Obama's Challenge and other books.

Wall Street Socialists

September, 19 2008

By Amy Goodman
Source: Truthdig

 

The financial crisis gripping the U.S. has the largest banks and insurance companies begging for massive government bailouts. The banking, investment, finance and insurance industries, long the foes of taxation, now need money from working-class taxpayers to stay alive. Taxpayers should be in the driver's seat now. Instead, decisions that will cost people for decades are being made behind closed doors, by the wealthy, by the regulators and by those they have failed to regulate.

 

Tuesday, the Federal Reserve and the U.S. Treasury Department agreed to a massive, $85-billion bailout of AIG, the insurance giant. This follows the abrupt bankruptcy of Lehman Brothers, the 158-year-old investment bank; the distressed sale of Merrill Lynch to Bank of America; the bailout of both Fannie Mae and Freddie Mac; the collapse of retail bank IndyMac; and the federally guaranteed buyout of Bear Stearns by JPMorgan Chase. AIG was deemed "too big to fail," with 103,000 employees and more than $1 trillion in assets. According to regulators, an unruly collapse could cause global financial turmoil. U.S. taxpayers now own close to 80 percent of AIG, so the orderly sale of AIG will allow the taxpayers to recoup their money, the theory goes.

 

It's not so easy.

 

The financial crisis will most likely deepen. More banks and giant financial institutions could collapse. Millions of people bought houses with shady subprime mortgages and have already lost or will soon lose their homes. The financiers packaged these mortgages into complex "mortgage-backed securities" and other derivative investment schemes. Investors went hog-wild, buying these derivatives with more and more borrowed money.

 

Nomi Prins used to run the European analytics group at Bear Stearns and also worked at Lehman Brothers. "AIG was acting not simply as an insurance company," she told me. "It was acting as a speculative investment bank/hedge fund, as was Bear Stearns, as was Lehman Brothers, as is what will become Bank of America/Merrill Lynch. So you have a situation where it's [the U.S. government] ... taking on the risk of items it cannot even begin to understand."

 

She went on: "It's about taking on too much leverage and borrowing to take on the risk and borrowing again and borrowing again, 25 to 30 times the amount of capital. ... They had to basically back the borrowing that they were doing. ... There was no transparency to the Fed, to the SEC, to the Treasury, to anyone who would have even bothered to look as to how much of a catastrophe was being created, so that when anything fell, whether it was the subprime mortgage or whether it was a credit complex security, it was all below a pile of immense interlocked, incestuous borrowing, and that's what is bringing down the entire banking system."

 

As these high-rolling gamblers are losing all their banks' money, it comes to the taxpayer to bail them out. A better use of the money, says Michael Hudson, professor of economics at the University of Missouri, Kansas City, and an economic adviser to Rep. Dennis Kucinich, would be to "save these 4 million homeowners from defaulting and being kicked out of their houses. Now they're going to be kicked out of the houses. The houses will be vacant. The cities are going to [lose] property taxes, they're going to have to cut back local expenditures, local infrastructure. The economy is being sacrificed to pay the gamblers."

 

Prins elaborated: "You're nationalizing the worst portion of the banking system. ... You're taking on risk you won't be able to understand. So it's even more dangerous." I asked Prins, in light of all this nationalization, to comment on the prospect of nationalizing health care into a single-payer system. She responded, "You could actually put some money into something that pre-empts a problem happening and helps people get health care."

 

The meltdown is a bipartisan affair. Presidential contenders John McCain and Barack Obama each have received millions of dollars from these very companies that are collapsing and are receiving the corporate welfare. President Clinton and his treasury secretary, Robert Rubin (now an Obama economic adviser), presided over the repeal in 1999 of the Glass-Steagall Act, passed after the 1929 start of the Great Depression to curb speculation that caused that calamity. The repeal was pushed through by former Republican Sen. Phil Gramm, one of McCain's former top advisers. Politicians are too dependent on Wall Street to do anything. The people who vote for them, and whose taxes are being handed over to these failed financiers, need to show their outrage and demand that their leaders truly put "country first" and bring about "change."

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This week's financial crisis marks the end of an epoch

Only rarely is there a palpable public mood swing in Britain; the Winter of Discontent in 1978-9 was one; this is another
Larry Elliott, economics editor guardian.co.uk, Friday September 19 2008 14:52 BST Article historyThis was the week the world changed. It started with the US authorities trying to rescue Lehman Brothers. It ended with the US taxpayer preparing to pick up the tab for the mistakes of Wall Street's elite. It started with the prime minister sipping cocktails with financiers in Canary Wharf.

It ended with the government slapping a ban on short-selling and Gordon Brown pledging to clean up the City. Britain's biggest lender was rescued and the Chinese government lined up to take a 49% stake in Morgan Stanley, one of the last US investment banks left after a week of carnage. Ben Bernanke, the chairman of the Federal Reserve and Hank Paulson, the Goldman Sachs tycoon who became US Treasury secretary, have done more for socialism in the past seven days than anybody since Marx and Engels.

Over and above the extraordinary individual events, there was the capitulation of the prevailing economic model. History will show that the great experiment with financial deregulation lasted from the first post-war oil shock in 1973 to the third oil shock in 2008.

Between those years the constraints on capital that were imposed after the Great Depression were whittled away, leaving a world of easy credit, complex financial instruments, stratospheric salaries and supine regulators. Like a spoiled child, what big finance wanted big finance got. This week saw the arrival on the scene of Supernanny; big finance now faces a long spell on the naughty step.

The revenge of Middle Britain

The changed mood is evident from the media backlash against hedge funds and short-sellers. One headline this week screamed: "Don't let the spivs destroy Britain". It appeared not in the Socialist Worker but in the Daily Express. For Middle Britain, the traders who bragged about their £1,000 bottles of Krug have now become as loathed as the bolshie shop stewards of the 1970s. Only rarely is there a palpable public mood swing in Britain; the Winter of Discontent in 1978-9 was one; this is another.

Brown caught that mood. Having cosied up to the City for more than a decade, the prime minister has belatedly rediscovered his party's social democratic roots. Labour, it seems, no longer believes that the market is king. It no longer assumes that the "masters of the universe" have all the answers. For the first time in living memory it has ceased cringing and sent out the message that finance should be the servant of the people and not vice versa. Let's not get carried away. The new spirit of interventionism remains cautious and cramped, and it was forced on the government by events. But the small print of the Lloyds TSB merger with HBOS included, at the government's insistence, a commitment to helping first-time buyers get access to the mortgage ladder and to safeguarding jobs in Scotland. Such meddling with commercial decisions was off limits until Tuesday this week.

There is no need for caution. The financial system is broken and it was significant today that markets rallied after the smack of firm government. Many of the more thoughtful people working in the markets know that deregulation has led to anarchy not freedom, and that boundaries need to be set. It remains to be seen, however, whether the plan by the US authorities to buy-up all the toxic mortgage-backed derivatives at a knock-down price will have the desired results - an improvement in bank balance sheets, the restoration of market confidence and the resumption of more normal patterns of lending.

As far Paulson and Bernanke are concerned, it is worth a try. Culturally, America is fixated by memories of the Great Depression and when, by Thursday night, it appeared that Goldman Sachs could itself fall victim to the market turmoil, the US treasury and the Fed were starting to conjure up lurid images of dole queues and soup kitchens. The emergency action to shore up the financial system was necessary, perhaps inevitable, but the reality is that it won't save either the US or the UK from recession. What's at stake is just how deep and long those downturns will be. In the meantime, the shift in the economic balance of power leaves the US at the mercy of China's willingness to keep financing its debts.

So how to mark the end of an epoch? In 1976, Jim Callaghan was the undertaker for the post-war social democratic order when he said: "We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that option no longer exists." On Tuesday, the prime minister should stand up and say: "We used to think you could borrow your way out of a recession and increase employment by increasing debt and setting the City free. I tell you in all candour that option no longer exists". It would bring the house down.

The trouble with fairy-tales

 

Like most girls of her age, Ariane Sherine believed in romance. She thought she had only to find the right person to find perfect passion and happiness. Then, slowly and painfully, she discovered the truth...

Friday, 19 September 2008

I was 15, he was 16, and our romance began with a lie about a jumper. It was the shapeless beige jumper he was wearing on a trip out with friends, and I didn't like it at all. "I like your jumper," I told him. "Can I try it on?"

It came down to my knees, but as I had hoped, he forgot to ask me to return it before he left. I rang him for the first time the next day. "I accidentally went home in your jumper," I lied again. "But I don't mind meeting up if you want it back?"

"I'd like to meet up," he replied earnestly. I wondered if he really missed the jumper. Maybe I'd give it back, and never see him again.

But when we met, he suggested that we go to the cinema. After the film, we held hands, our fingers sticky from the sweet popcorn. "Do you have a boyfriend?" he asked.

"No," I answered, trying to sound as though this were unusual, when in fact I'd never had a boyfriend.

We kissed for the first time. "Then will you be my girlfriend?" he replied, and I wondered if there had been a better moment than this for anyone, anywhere, ever.

To start with, it was easy. We were in love, and it felt like everything I'd ever seen or read about romance: like being coloured in brightly after years of living in greyscale. I was floating in a hot air balloon full of misspelt poems, mix tapes and inept kisses, which took me away from my bleak home life, and I hoped it would never come down.

He was everything I imagined a boyfriend would be. He would walk me home though it took him round the long way, bring me flowers he'd picked, wrap his arms tight around me when I was cold, and wait for me patiently whenever I was late to meet him. He even insisted on giving me the ugly jumper. "You like it – you should keep it," he explained when I protested. I began to sleep while holding it, because it smelt of him.

I forgot the emptiness of both home and school whenever I was with him. Even as I failed in every other area of my life, our romance seemed all the more luminous for it. I began to meet him instead of going to lessons in the afternoons, sliding like a school-uniformed fugitive through the back gate and running down the tunnel into his arms.

I remember the day we slept together for the first time, clean and fresh and new, and the way we weren't quite sure what to do. We were certain, though, that our last time would also be with each other.

"I love you," he told me that day. "I've never said that before, and I never want to say it to anyone else."

"I love you too, so you'll never have to," I replied.

I truly thought those heady, illusory butterfly feelings would never fade. That we would always kiss until we could barely breathe, and that my heart would forever dance and skip when he rang me up, even if it was only to say "The trains aren't running today." Just 17 and More! magazine ran stories of perfect relationships, and couples who had been in love for decades, even if they had yet to publish the article "Snare him by stealing his jumper".

When things first began to slow down, two years later, I didn't understand what was happening. I decided I was just imagining that he and I were talking and laughing less; that sometimes, he would forget to call me, and that when we did speak, we seemed to have little to say.

"You're not bored of me, are you?" I asked a number of times. Eventually he replied, "I'm a bit bored of you asking if I'm bored."

I was certain this lull in romance was temporary, caused merely by a change in our lives. I had been expelled from school for throwing a Coke can in somebody's face (they had spat in my lunch first, but apparently that "wasn't an excuse") while he was now going to university. Things would return to the way they'd been before, I told myself, and in years to come we would probably laugh and ask: "Do you remember that time when we forgot how to talk to each other?"

I tried not to worry. But to my confusion, our relationship seemed to slide even further downhill. We slept together less often, and in the mornings he would be irritable because I had unknowingly stolen the duvet all night. We seemed to be less in love with each other, and these days he rarely said "I love you" first. It felt as though something had shifted between us, and I was scared that it wouldn't shift back.

Nobody had told me this was normal: I had never heard of relationships settling down, becoming calm and still, and losing their giddy, breathless spark. Somehow, my life had slid back into greyscale, and I didn't know how or why.

"Something's wrong," I persisted. "Things are different to how they were when we met."
"Of course they're different," he replied. "We know each other now. Every moment isn't going to be new."

But I desperately wanted it to be.

I wish now that someone had explained to me that love is like a beautiful spinning top: that it whirls gaily and exhilaratingly fast at the beginning, mesmerising everyone with its loud melody and pretty, gaudy blur. But that it is only when it begins to slow down that you can see exactly which shapes and hues are there, and whether it will tumble and fall, or keep on spinning gently and steadily forever. I'm certain that, for us, it could have been the latter.

Instead, I decided that I could draw things back to the start. I bought a book, one of many which promised that if I followed its instructions "he will feel crazy about you, forever!" It told me that, if I pretended to ignore him, he would be more interested in me. I wasn't quite sure how that would work or why, but when I tried to ignore him he didn't seem to notice, and I didn't think I was allowed to wave at him and say: "Hey – by the way, I'm ignoring you!"

The book said he hadn't noticed because he didn't care. Afraid it was right, I began to argue with him, and said for the first time: "I think we should split up."

"Is that what you want?" he asked.

"No," I replied truthfully. "I want things to be back as they were at the beginning."

"They're not going to be," he said.

"Why not?" I asked.

"Because we're not at the beginning," he explained.

That "wasn't an excuse", I told him, and broke up with him.

It was the first in a long string of break-ups where I would leave, crying and confused, then return, asking him to forgive me. He would, and we would try again, but I still wouldn't be able to accept that things had changed. I didn't want a stale, empty and useless relationship, I insisted: I wanted love, the kind of impossible, senseless love that could never be cajoled or coerced. Sometimes I tried to hurt him so that he would say something, anything, but he would just seem disappointed in me.

"You know," he once said, "maybe I can't give you what you want any more, but I'd never leave you."

That, I think now, should have been romance enough.

I was 22, he was 23, and our relationship ended with a lie about a fairy tale. I threw the poems, mix tapes and shapeless beige jumper away, rather than inflict them on an unsuspecting and unfortunate charity shop, and went in search of the glorious spinning top that whirled endlessly, and the hot air balloon that always floated over the clouds in the sunlight and never came down.

I failed hopelessly. I missed him more than ever, but told myself I had to forget him or I'd never move on. I flitted from one meaningless relationship to the next, deciding that each was broken whenever the joy and pain and wonder settled into anything more grown-up. I tried several times, but every romance burned out exactly like the last, leaving me even more disillusioned.

Slowly, I began to wonder if it was possible that all relationships ended up like my first. Maybe romance never lasted beyond a few years, and all the magazines and books that promised it could if you only tried hard enough were destroying relationships everywhere. I knew that half of all relationships fell through, and that women ended marriages twice as often as men. Maybe it wasn't love that failed us these days, but our expectations.

I wondered if the world was littered with couples who broke up because they were told, as I was, that "being in love forever" was possible, and felt inadequate and disconsolate when their relationships became less poetic and more absentminded. Perhaps they refused to believe that true love could forget to call, have little to say, or snap at you over a lack of duvet, not understanding that love is about acceptance, and that a relationship is only ever perfect when you barely know the other person.

If this were true, I decided, it wasn't entirely their fault. Romance is almost impossible to escape from these days, however hard you try to avoid it: it seems to spill from nearly every song, story and film, filling our radios and televisions. Its ubiquity leads us to believe that we must fall in love and stay in love, or drown in depression forever. And unless we can separate our lives from fiction, and accept that the most we can hope for is quiet contentment, we'll be forever searching for happy endings – yet will only ever be left with endings.

I hadn't spoken to my childhood sweetheart since we broke up, but while writing this, I started to wonder where he was now, and who he was with, if anyone. I had heard that he'd met someone else, but that was years ago. People split up all the time, I knew. He could still be single.

I had no number for him, but still knew his childhood telephone number off by heart, and wondered if his parents had moved house. Unthinkingly, I dialled the number, my fingers shaking and my heart beating faster, just as it had the first time I had called him about the jumper. Maybe, I thought blindly, all wasn't lost.

His mother answered on the third ring, and her voice changed when I explained who I was.
"Hello love!" she exclaimed. "I haven't heard from you in forever. It's been... how long has it been?"

"A very long time," I replied.

And after talking about nothing much for a while, I told her: "I was just wondering how he was?"

"It's funny you should ask," she replied. "He's getting married this weekend. To the girl he met after you." 

Desire: A dangerous flame

We think of it as an irresistible force – yet we are so in thrall to it that we have ceased to respect it. Jeanette Winterson looks at the power of desire

Thursday, 18 September 2008

Why is the measure of love loss? In between those two words – love, loss, and standing on either side of them, is how all this happened in the first place. Another word: desire.

While I can't have you, I long for you. I am the kind of person who would miss a train or a plane to meet you for coffee. I'd take a taxi across town to see you for 10 minutes. I'd wait outside all night if I thought you would open the door in the morning. If you call me and say "Will you..." my answer is "Yes", before your sentence is out. I spin worlds where we could be together. I dream you. For me, imagination and desire are very close.

Desire is always a kind of invention. By which I mean that the two of us are re-invented by this powerful emotion. Well, sometimes it is the two of us, sometimes it might just be me, and then I am your stalker, your psychopath, the one whose fantasy is out of control.

Desiring someone who has no desire for you is a clue to the nature of this all-consuming feeling; it has much more to do with me than it has to do with you. You are the object of my desire. I am the subject. I am the I.

When we are the object of each other's desire it is easy to see nothing negative in this glorious state. We become icons of romance, we fulfil all the slush-fantasies. This is how it is meant to be. You walked into the room... Our eyes met... From the first moment... and so on.

It is safe to say that overwhelming desire for another person involves a good deal of projection. I don't believe in love at first sight, but I do believe in desire at first sight. Sometimes it is as simple as sexual desire, and perhaps men are more straightforward there, but usually desire is complex; a constellation of wants and needs, hopes and dreams, a whole universe of uninhabited stars looking for life.

And nothing feels more like life than desire. Everyone knows it; the surge in the blood, cocaine-highs without the white powder. Desire is shamanistic, trance-like, ecstatic. When people say, as they often do, "I'd love to fall in love again – that first month, six months, year...", they are not talking about love at all – it's desire they mean.

And who can blame us? Desiring you allows me to feel intensely, makes my body alert as a fox. Desire for you allows me to live outside normal time, conjures me into a conversation with my soul when I never thought I had one, tricks me into behaving better than I ever did, like someone else, someone good.

Desire for you fills my mind and thus becomes a space-clearing exercise. In this jumbled, packed, bloated, noisy world, you become my point of meditation. I think of you and little else, and so I realise how absurd and wasteful are most of the things that I do. Body, mind, effort, are concentrated in your image. The fragmented state of ordinary life at last becomes coherent. No longer scattered through time and space, I am collected in one place, and that place is you.

Simple. Perfect.

Until it goes wrong.

The truth is that unless desire is transformed into love, desire fails us; it fails to do what it once did; the highs, the thrills. Our transports of delight disappear. We stop walking on air. We find ourselves back on the commuter train and on our own two feet. Language gives it away; we talk about coming back down to earth.

For many people, this is a huge disappointment. When desire is gone, so is love, and so is the relationship. I doubt, though, that love is so easy to shift. Loving shies away from leaving, and can cope with the slow understanding that the beloved is not Superman or Miss World.

We live in an "upgrade" culture. I think this has infected relationships. Why keep last year's model when the new one will be sleeker and more fun? People, like stuff, are throwaways in our society; we don't do job security and we don't offer security in relationships. We mouth platitudes about time to move on, as though we were doing something new-age and wise, when all we really want is to get rid of the girlfriend/boyfriend/husband/wife.

I don't want a return to the 1950s, when couples stayed together whatever the hell, but whoever said that relationships are easy?

Advertising always promises that the new model will be easier to use. And of course when you "upgrade" to the next relationship, it is also easier – for a while.

If you are pretty or personable, handsome or rich, serial relationships offer all the desire and none of the commitment. As sexual desire calms, and as the early fantasies dissolve, we begin to see the other person in real life, and not as our goddess or rescuer. We turn critical. We have doubts.

We begin to see ourselves, too, and as most of us spend our entire lives hiding from any confrontation with the self, this sudden sighting is unpleasant, and we blame the other person for our panicky wish to bolt. It is less painful to change your partner than it is to confront yourself, but one of the many strange things about love is that it asks that we do confront ourselves, while giving us the strength of character to make that difficult task possible. If desire is a magic potion, with instant effect (see Tristan and Isolde), then love is a miracle whose effects become apparent only in time. Love is the long-haul. Desire is now.

An upgrade culture, a now culture, and a celebrity culture, where the endless partner-swapping of the rich and famous is staple fare, doesn't give much heft to the long-haul. We are the new Don Giovannis, whose seductions need to be faster and more frequent, and we hide these crimes of the heart under the sexy headline of "desire".

Don Giovanni – with his celebrated 1,003 women, is of course dragged off to Hell for his sins. Desire has never been a favourite of religion. Buddhism teaches non-attachment, Christianity sees desire as the road to the sins of the flesh and as a distraction from God. Islam has its women cover themselves in public lest any man should be inflamed, and jeopardise his soul. In Jewish tradition, desire ruins King David and Samson, just as surely as modern-day Delilah's are still shearing their men into submission. Yet it would be misleading to forget the love poem in the Bible that is the "Song of Solomon"; a poem as romantic as any written since, that gives desire a legitimate place in the palace of love.

And quite right too. Desire is wonderful. Magic potions are sometimes exactly what is needed. You can love me and leave me if you like, and anybody under 30 should do quite a lot of loving and leaving. I don't mean that desire belongs to youth – certainly it does not – but there are good reasons to fall in love often when you are growing up, even if only to discover that it wasn't love at all.

The problems start when desire is no longer about discovery, but just a cheap way of avoiding love.

It is a mistake to see desire as an end in itself. Lust is an end in itself, and if that is all you want, then fine. Desire is trickier, because I suspect that its real role is towards love, not an excuse in the other direction.

There is a science-based argument that understands desire as a move towards love, but a love that is necessary for a stable society. Love is a way of making people stay together, desire is a way of making people love each other, goes the argument. This theory reads our highest emotional value as species protection. Unsurprisingly, I detest this reading, and much prefer what poets have to say. When Dante talks about the love that moves the sun and the lesser stars, I believe him. He didn't know as much as we do about the arrangement of the heavens, but he knew about the complexity of the heart.

My feeling is that love led by desire, desire deepening into love, is much more than selfish gene-led social stability and survival of the species. Loving someone is the closest we can get to knowing what it is like to be another person. Love blasts through our habitual sclerotic selfishness, the narrow "me first" that gradually closes us down, the dead-end of the loveless life.

There are different kinds of love, and not all of them are prefaced by desire, yet desire keeps its potent place in our affections. Its releasing force has no regard for conventions of any kind, and it crosses genders, age, social classes, religion, common sense and good manners with seemingly equal ease.

This is bracing and necessary. It is addictive. Like all powerful substances, desire needs careful handling, which by its nature is almost impossible to do.

Almost, but not quite. Jung, drawing on alchemy, talked about desire as the white bird, which should always be followed when it appears, but not always brought down to earth. Simply, we cannot always act on our desire, nor should we, but repressing it tells us nothing. Following the white bird is a courageous way of acknowledging that something explosive is happening. Perhaps that will blow up our entire world, or perhaps it will detonate a secret chamber in the heart. For certain, things will change.

I don't suppose that the white bird of desire is nearly as attractive to most of us as the white powder substitute with natural highs. Desire as a drug is racier than desire as a messenger. Yet most things in life have a prosaic meaning and a poetic meaning, and there are times when only poetry will answer.

For me, when I have trusted my desire, whether or not I have acted on it, life has become much more difficult, but strangely more illuminated. When I have not trusted my desire, out of cowardice or common sense, slowly I have gone into shadow. I cannot explain this, but I find it to be true.

Desire deserves respect. It is worth the chaos. But it is not love, and only love is worth everything.

A tribunal must tell us what to fix. And whom to punish

 

 

The state shirked its role while City stupidity and greed slid into thieving. When the crisis subsides, an inquiry is needed

All comments ()

• 
• • Simon Jenkins
  • The Guardian,
  • Wednesday September 17 2008
  • Article history

Who are they? Where are they now? They said it could not happen again. They said they were masters of the universe. They had conquered history itself and had that wily monster quivering at their feet. There would be no more crashes, no more recessions, no more booms and busts, just moonbeams and rainbows and jam for tea.
If the mistakes that have collapsed the world's financial markets had been made by statesmen and had led to war, there would be corpses swinging from lampposts. If they had been made by generals, they would be falling on their swords. If they had been made by judges or surgeons or scholars, some framework of professional retribution would be rolling into action. But those responsible for our finances can apparently vanish into the forest like Cheshire cats, leaving only gold-plated grins. Not for them a Hague tribunal or a Hutton inquiry. They are not just good at shedding risk - they shed blame.
We are seeing what historians of ideas call a paradigm shift. In the last century, the necessities of war and the rise of socialism thrust government intervention to the fore. When that failed in the 60s and 70s, the "Reagan-Thatcher revolution" turned the emphasis back to private enterprise and deregulation. That era has ended with astonishing abruptness. Governments in Britain and the US have been nationalising and spending public money with a will that would have made Attlee or Roosevelt blush.
Those of us who learned economics in the old days were taught that banks had to be regulated oligopolies because their role in a capitalist economy was crucial. It relied on the sustenance of public trust which only government, backed by the citizen as taxpayer, could dispense. In Britain, retail banks, merchant banks and building societies were legally distinct, separated by barriers to prevent cross-pollution of the sort that caused the 1929 crash.
JK Galbraith's book on that crash is the Dr Strangelove of financial holocaust. If it offers one lesson, it is that crashes are not acts of God; they are caused by the interaction of corporate behaviour and state regulation. Nor does the market supply its own discipline. Understanding that, wrote Galbraith, "remains our best safeguard against recurrence".
Such lessons learned in youth tend to stick. Hence I remember feeling queasy when Thatcher's "big bang" of 1986 demolished the firewalls and permitted the trading of risk and reward across the entire financial sector. It was a reform repeated in the US with the repeal of the post-depression Glass-Steagall law. The same nervousness greeted each subsequent shock to the system - the 1991 housing crash, Lloyd's of London, Barings, Enron, Northern Rock. Each time we were assured that new lessons had been learned. Light-touch regulation was working fine, even if sometimes boys will be boys.
The naivety of all this is now exposed. Politicians encouraged the public to treat home ownership as a "right"; property became the citizen's gilt-edged stock. Bankers encouraged staff to speculate with depositors' money by awarding them huge bonuses to maintain turnover. Those charged with the guardianship of other people's savings behaved, in effect, like thieves. Sheer greed drove young men and women mad. Nobody in authority batted an eyelid.
At the same time Gordon Brown "set free" the Bank of England to fix interest rates. I recall one commentator telling me that I should be "overjoyed your children and grandchildren will now never have to experience inflation". No, they are just unemployed. It was a charade. On the back of low inflation, the Bank fuelled a credit boom that was clearly vulnerable if prices rose and/or credit collapsed. Both have occurred.
There is no such thing as a "non-political" official rate of interest. The Bank is now under pressure both to cut rates to beat recession, and yet raise them to beat inflation. It cannot do both. Since it would be 1929-style lunacy to increase rates just now, Brown must in effect tell the Bank to reduce them by shifting his inflation target. It is a blatant and properly political decision.
There is no perfect market. Markets need regulation, just as communities need law. Yet as Galbraith again wrote, regulators may start life "vigorous, aggressive, evangelical, even intolerant", but mellow with age and become "an arm of the industry they are regulating - or senile".
To ignore the danger in 125% mortgages or the City bonus culture showed both industry capture and senility. The first was loan-sharkery, and the second was obscene. So distorting to sound finance are year-end bonuses that they should simply be banned. Those with the responsibility of gambling with other people's savings should do so on salary.
While naive Thatcherism may have taken a pasting, there is no reason why capitalism should protest the presence of big government in what is its proper realm. We do not curb state power when the security of the state is at risk. Nor should we do so when the security of the economy is equally jeopardised.
The strangest phenomenon these past few days has been the eagerness to enforce "moral hazard", a concept regarded by the governor of the Bank of England as a deterrent to risk-taking. This is absurd. The collapse of Enron was no deterrent to Lehman derivative traders. The psychology of money does not work that way. The victims of the credit crunch are not just a few wild traders. They are all participants in the UK economy. I cannot see the sense in letting Northern Rock or Lehman or any other deposit-holding institution go bust just so regulators who have failed in their jobs can seem macho after the event.
This is not a question of blowing taxpayers' money on fat cat financiers. I would happily arrest and try all those whose stupidity and greed are about to cause untold hardship to millions - if I could find a law they had broken. Dr Johnson was quite wrong to say a man is "never more innocently employed than in getting money". But when a building collapses, you do not kill the architect. You try to get him to build it again.
Underpinning financial credit is an absolute function of government and one that has not changed since the birth of capital. It clearly needs constant redefinition. When this saga is through there should be a tribunal of inquiry. Then we can be told what needs mending, and whom to take out and shoot.

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Crunch time

 

 

We've heard the bankers' stories. The economists have had their say. But what do the opponents of capitalism make of the global financial crisis? Is this the moment they have been waiting for? Stephen Moss and Jon Henley ask high-profile leftwingers for their views on the meltdown - and whether any good can come of it

• Stephen Moss and Jon Henley
• The Guardian,
• Wednesday September 17 2008
• Article history

Traders at the Wall Street Stock Exchange during the collapse of Lehman Brothers Holdings. Photograph: Rex Features

Daniel Cohn-Bendit

Student leader in Paris, 1968
This financial crisis is for capitalist neo-liberals what Chernobyl was for the nuclear lobby. It's a catastrophe. I hope we all learn lessons from it. But am I optimistic that we will? That's another question. To think that the biggest neo-liberal nation in the world would start nationalising banks ... we're rubbing our eyes in disbelief.
It's not the end of capitalism because capitalism has always had the intelligence to reform itself. It will be the end of capitalism when it's incapable of reforming. However, the belief that the market is god is over. It must now be regulated.
We fought for 20 years to bring attention to climate change. It took us a while, but we were right. This crisis will help us in our arguments for sustainable development - that we need a balance between the environment, society and the economy - but I get no joy from it; it saddens me deeply. Ordinary people lose everything, while the big bankers themselves walk away with millions.
· Daniel Cohn-Bendit was leader of the May 1968 student protests in Paris, when he was known as 'Danny the Red'; he is now a green MP

Jarvis Cocker

Singer
It's really nice seeing capitalism getting its comeuppance. It had gone too far: I think most people can understand capitalism when it's about companies that make real products, but when it's about organisations that just make money ... that's abstract capitalism, it's beyond most ordinary people - and I include myself among them. I mean, you see the FTSE index, or whatever, running along the bottom of the TV screen and generally it just doesn't impinge at all on the way you live your life, and then suddenly you're told your life is going to take a nosedive. Who understands that?
The truly sad thing is that all this is taking place with a so-called Labour government in power, a government that should have the interests of the majority at heart, but has instead played the role of a pimp.
Maybe a bit of a recession will do us some good. A lot of people have been living beyond their means. We've all done it, I've done it: you feel a bit depressed, you go and buy something. People might now actually talk to each other a bit more, make their own entertainment, all those other great northern cliches. The tragedy is that it will be the ordinary people who will bear the brunt. The guys who are responsible may have to sell the yacht.

Salma Yaqoob

Birmingham City councillor
This crisis opens up possibilities for alternative economic models as the wheels come off this one, but I'm worried about the immediate social consequences. A leaked report from the Home Office a couple of weeks ago referred to a rise in racism and social tensions. My concern is that we'll now see some ugly racist scapegoating as politicians try to pass the buck.
When the markets were being treated as gods, we were always being promised that there'd be a trickle-down of prosperity. But all that's trickled down has been a greed-is-good philosophy. The consequence is a more unequal, self-centred, crueller Britain. It's important that we should reflect on the kind of society we've become, but also on the kind of society we want to be. Recently, Unicef reported that Britain's children are the unhappiest in Europe, and I think that is not unconnected to an economic climate that forces parents to work longer and longer hours. We hear a lot of talk about youth and gangs and guns; what we don't talk about are the economic policies that would allow families to nurture each other and make young people feel valued.
The very people for whom it was a sacred othodoxy that there should be no government intervention are now coming to the government on their hands and knees begging for assistance. But what about the government intervening on behalf of ordinary people? Why not do something literally concrete on the ground and start building cheaper social housing? Why not put people at the centre of things?
· Salma Yaqoob is a Birmingham councillor and vice-chair of the Respect party

Ken Livingstone

Former Mayor of London
Sadly, I don't think this will be the end of capitalism. But there is going to have to be a return to a much, much more interventionist state. As a system for the distribution and exchange of goods, you can't beat the market. But the mistake a lot of politicians have made is to think that because the market was good at that, it could be good at everything: it could train workers, create infrastructure, protect the environment, regulate itself. Quite obviously, it can't.
So the real issue is, what sort of international structures do we need to ensure this never happens again? Thatcher and Reagan deregulated massively and let the financial markets do as they liked - and they've turned into one bloody great big rip-off. The good news is, there'll now be a realisation - even George Bush sees this now - that we need international regulatory mechanisms that will ensure, for example, that these people and operations actually pay tax. There'll be a realisation in Britain that while it's certainly useful to host a world financial centre, it has to rest on a solid, genuinely productive real economy. In China now they make things; we've decided we're not interested in that.

Bob and Roberta Smith

Artist
Yesterday, at the same time as Lehman Brothers went belly up and Merrill Lynch was bailed out, Damien Hirst made £70m. This tells us that capitalism is not dead. The rich got richer, and the poor got poorer - and in the evening, the rich went to an art sale and spent the small change in their pockets. This crisis is kind of like the capitalist cat shifting on its cushion.
I don't buy the romanticism of the left: you can't kill capitalism, trade is how people operate. But I do think the left's analysis has to be coruscating and hard. The number-crunching, the smokescreens, that particular flavour of snake oil has to be finished; this has to be about real people now. There should be no self-congratulation, no, "Oh good, they're getting their comeuppance," because behind every banker there are ordinary people in bigger trouble.
· Bob and Roberta Smith is the pseudonym of artist Patrick Brill

Caroline Lucas

Green MEP
This is a defining moment; the end of the kind of unbridled, deregulated capitalism of the past few decades. We are going to have to return finance to its role as servant rather than master of the global economy, and we're going to have to break up financial institutions into smaller units: mega-banks make mega-mistakes that affect us all.
The way forward is the Green New Deal [co-formulated by, among others, Caroline Lucas and Guardian economics editor Larry Elliott]. We have to tackle a triple global crunch. In the face of a credit-fuelled financial crisis, we're going to have to re-regulate finance and taxation, clamp down on tax havens, split retail banking from merchant banking and securities trading. In the face of accelerating climate change, we have to face up to global warming. And in the face of an oil-price crisis, we're going to have to find the solutions to encroaching peak oil.
The situation we're in now is an opportunity, although it remains an enormous threat also. It's the chance for us to move forward in a way that's sustainable economically and environmentally. This is about real people and real jobs, right now. I really wish we'd managed to get that message through before it happened.

Ken Loach

Film director
This is further evidence, if any were needed, of the fact that the market is not and never can be the answer. (The need to pursue illegal wars is pretty strong evidence too, of course.) You look around the world and you see massive need on the one hand, and massive wealth on the other, and the two never connect. The market is massively inefficient, capitalism is massively unstable and turbulent, and it's insane that we are all bound to this terrible wheel of instability.
The real left is making a lot of noise about this. There'll be a convention of the left during the Labour party conference, all the shades of genuine leftwing opinion, and we'll be hammering all these questions out from a socialist perspective. But if the papers and the broadcasters fail to record it, it's very difficult for these ideas to penetrate the public consciousness. The media just turns a deaf ear; it chooses not to hear it. It's a lot more interested in the careerism of whoever's after Gordon Brown's job.
Will this be a defining moment for the left? It should be, of course but it's very difficult to be optimistic given our history of failure. The war against Iraq was a massive opportunity to create a coherent anti-capitalist movement, to find a real socialist alternative, and we let it slip through our fingers. This is another such opportunity, and we must not let it go.

Michel Onfray

Philosopher
Is this the end of capitalism? Absolutely not. The key feature of capitalism is that it's malleable. It has been through antiquity, feudalism, the industrial era, it has worn the guise of fascism and now it's wedding itself to the ecology cause. After this latest event, it will take on a new form. It is indestructible and works like the Hydra of Lerne, cut off one head and another grows in its place. Is this the end of society's obsession with money and credit? Not at all.

Chris Harman

Socialist Workers Party
This is a very, very serious crisis of capitalism: it has been the build-up of private borrowing that has kept the system going, and it's coming unstuck. The whole system is unwinding; the other day we saw the biggest nationalisation in the history of humanity and that still wasn't enough. Governments don't know what to do, and it's the rest of us who have to live with the consequences. The Labour party is offering no alternative, the Lib Dems are offering no alternative, the Conservatives are offering no alternative.
This could be a big moment for the left. But we really need to stand up and use the "c" word, say this is a crisis of capitalism and that people are suffering. The thing is, all the media coverage yesterday was of the bankers leaving Lehman Brothers with their boxes, but the people who will really be hit are the cleaners, the secretaries - what did we see of them? We have to build resistance. Because so far we've only seen the minor problems; people stuck in foreign airports or having a bit of trouble getting a job. Things are going to get much, much worse.
· Chris Harman is the editor of International Socialism (SWP)

George Monbiot

Green campaigner
It's only in times of crisis that people are prepared to contemplate taking to the streets. It was noticeable that there were a lot more protests - against road developments, for instance, and against the Criminal Justice Act and other infringements of civil rights - in the wake of the 1991 recession than there were in the mid-90s, when people were feeling richer. Some people, faced with recession, tend to hunker down, but others confront the government and demand a better deal, and that gives the left hope.
A Keynesian solution along the lines of Roosevelt's New Deal could deliver many of the things that the left is calling for - more public spending, more training and education. I'm particularly interested in the idea of a green new deal, which would employ large numbers of people to insulate homes and carry out major environmental works. Remember that the central plank in the New Deal was the Civilian Conservation Corps, which employed three million people.
It is striking that the left has been slow to capitalise on the situation. There is now a good opportunity to build a common front between trade unions, disillusioned labour voters, greens and people who feel that their economic position is slipping.
· George Monbiot is a Guardian columnist

Max Keiser

Former broker
This is not a blip. It's extremely significant. We will see a shift in power away from the US, and towards the developing world - to countries such as Brazil and the Gulf states that have commodities to sell, and to China, where the savings ratio is high. We are going to see a new world order. America as a driver of the global economy is finished.
The left has nothing to say about any of this. And because the left has no economic programme, we will see the rise of social unrest. We are already seeing it in the US. The left has no real response to that either.
· Max Keiser is a former broker, and presenter of The Truth About Markets on Resonance FM

Tony Benn

Former Labour minister
I remember the 1930s. What the Depression did then was to stimulate antisemitism. I met Oswald Mosley in 1928 when he was a Labour MP. The next time I met him he was wearing a blackshirt. Where there is fear, there is scapegoating, and that is very dangerous.
Blair and Brown based their politics on a belief in the market: the market answered all your needs and the state had to be kept out. That confidence has now collapsed and New Labour is seen for what it is. You can't, as New Labour believed, nurse capitalism.
I believe a new labour movement will emerge from this with a more realistic sense of how capitalism works. There is a left convention at this year's Labour conference, a sort of parallel conference. This year's Labour conference is the first in my lifetime when you will not be allowed to vote, so the left convention will get a lot of attention. At last, after a period when we've been told to trust the gamblers, there are many relevant ideas emerging on the left.

Lindsey German

Stop the War coalition
This growing crisis will mean misery for working people and shows that everything we've been told about the free market has been false. At the same time, it's a big opportunity. Millions of people will be questioning why this has happened, what's wrong with the system, is it 1929 all over again? The left needs to put forward answers. People have the right to work; we have a housing crisis, so why not employ people to build more houses? We are facing great challenges, but there is also a historic opportunity for the left to remake itself. Capitalism has had its chance and failed; now it's socialism's turn.
· Lindsey German is Convenor of the Stop the War Coalition and Left List candidate in this year's London Mayoral election

Sheila Rowbotham

Socialist feminist
In the late 19th century and also in the 1930s, the impact of depression made people begin to question whether the free market and a completely unfettered form of capitalism was the best form of organising society. In both periods it encouraged on the left the idea of a complete social transformation through revolution, and also encouraged people to devise various schemes for social reform. The problem now - unlike in the 1880s, when people discovered the ideas of socialism, and in the 1930s, when it seemed that communism was the solution - is that the left doesn't have a coherent alternative vision.
The Labour party has always been ambiguous about whether it is trying to make capitalism more efficient, or whether it is trying to soften its harshness. Since the 1970s, the left has been much weakened, as neoliberal ideas became totally ascendent. Under Blair, the idea that the Labour party was committed to any redistribution was pushed to the sidelines. I would like to see a new kind of left - a left that would relate to the present predicament. There is a consensus forming that says an unregulated financial system is a disaster, but whether that new left can be formed is questionable. I'd be very glad to see it happen.
· Sheila Rowbotham is professor of gender and labour history at Manchester University

George Galloway

Respect MP
I think the end of capitalism will be a process, not a single event. But each event we've seen so far has gone deeper than people have predicted, and we don't know how deep this one will go. It could well be that it marks the collapse of at least a major section of the capitalist economy: the financialisation of the economy that has been powering ahead since the deregulation and neo-liberalisation of the Thatcher-Reagan years.
As far as the left is concerned, well, the Liberal Democrats have effectively moved to the right in the face of this week's events, and New Labour, with a few honourable exceptions, abandoned that territory a very long time ago. Now I would have thought - in fact, I know - that among the public in general there is a much bigger and a much wider audience for progressive ideas than there has been for some time. But what the left still has to overcome is its inability to speak in a language that ordinary people can understand. And to stop arguing about dead Russians.

Hari Kunzru

Novelist
I'm in New York right now and the feeling here is quite visibly one of panic. I've just met, quite randomly, three people who were helping their friends clear their desks. Apparently, 12,000 jobs went, just like that, and Wall Street represents 20% of the city's jobs and something like 90% its tax base. So there's a definite sense here of systemic crisis.
A great financial economist and historian called Michael Hudson talks about how the US economy is basically fictitious, based on pretend earnings and pretend values. This will only genuinely become a crisis of capitalism if people generally become aware that much of the growth and prosperity produced by capitalism is a fiction, and if the consensus about where the real global value lies shifts radically. In other words, if people stop believing that apparently wealthy countries actually are producing wealth.
I don't immediately expect to be living in some kind of Mad Max world. But this could be the death knell of the time when we were all singing the beauties of free-market capitalism.

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